UPSC Prelims Practice Questions — ‘41%’ illusion: a quiet re-engineering of India’s fiscal federal landscape

Question 1

Within the Union Government, the administration of inter-se distribution of net proceeds of Union taxes among States, as recommended by the Finance Commission, is handled by which one of the following?

Accepted Answer

Department of Expenditure, Ministry of Finance

Answer

Department of Revenue, Ministry of Finance

Answer

Department of Economic Affairs, Ministry of Finance

Answer

Department of Financial Services, Ministry of Finance

Question 2

The Sixteenth Finance Commission, which recommended retaining the States' share in the divisible pool at 41% for 2026-31, was constituted by the President under which one of the following provisions of the Constitution of India?

Accepted Answer

Article 280

Answer

Article 270

Answer

Article 275

Answer

Article 281

Question 3

In the context of the recommendations of the Sixteenth Finance Commission, the term 'divisible pool' of central taxes refers to which one of the following?

Accepted Answer

The net proceeds of Union taxes and duties, excluding the cost of collection, cesses and surcharges, which is shared between the Union and the States

Answer

The gross tax revenue of the Union Government, including all cesses and surcharges, shared between the Centre and the States

Answer

All taxes collected by the Union and the States together, pooled and redistributed on the basis of the Finance Commission's horizontal formula

Answer

The portion of Union tax revenue retained by the Centre after transferring the constitutionally fixed share to States and Union Territories with legislatures

Question 4

With reference to the horizontal devolution formula of the Sixteenth Finance Commission (2026-31), consider the following criteria and their assigned weights:
1. Contribution to GDP — 10%
2. Forest & Ecology — 10%
3. Area — 15%
4. Population (Census 2011) — 17.5%
Which of the above are correctly matched?

Accepted Answer

1, 2 and 4

Answer

1 and 2 only

Answer

2, 3 and 4

Answer

1, 3 and 4

UPSC Prelims Practice Questions — ‘41%’ illusion: a quiet re-engineering of India’s fiscal federal landscape

Q1. Within the Union Government, the administration of inter-se distribution of net proceeds of Union taxes among States, as recommended by the Finance Commission, is handled by which one of the following?

Q2. The Sixteenth Finance Commission, which recommended retaining the States' share in the divisible pool at 41% for 2026-31, was constituted by the President under which one of the following provisions of the Constitution of India?

Q3. In the context of the recommendations of the Sixteenth Finance Commission, the term 'divisible pool' of central taxes refers to which one of the following?